The British economy looks set for a protracted recovery from the coronavirus pandemic, as figures reported by The Guardian raise fears about the escalating debts burdening UK businesses.
The newspaper said that new statistics showed British firms had taken on debt at more than twice the normal average growth rate since the onset of the crisis. This rate of increase would mean businesses reaching £61 billion in total borrowing by the end of this year.
The first month or so of 2021 has been a tough one for businesses throughout the UK, as tight lockdown restrictions have remained in place amid sustained high COVID-19 infection levels.
It should be unsurprising, then, that one accountancy firm has forecast a £26 billion increase in borrowing from banks this year, which would be up to £17 billion more than in 2019.
How is the government continuing to support British firms?
As businesses up and down the UK continue to face pandemic-related headwinds, the government has announced that struggling firms will be given more time to make their first repayment on government support loans.
Firms are now being given the option of paying back the total sum over 10 years instead of six. They are also being allowed to choose to pay only the 2.5% interest on the loans.
However, with one industry figure expressing fears that the “colossal amount” of borrowing was largely being used to ensure businesses’ survival rather than to fund growth, there are rising concerns about the scale of new business debt potentially holding back economic recovery.
What are the expectations for the coming Budget?
Chancellor of the Exchequer Rishi Sunak is expected to use his 3rd March Budget to unveil support measures to aid economic revival, as the government also looks to ease coronavirus restrictions in the spring.
The Financial Times has reported that the Budget “is not expected to contain many big tax rises”, with its main focus being continued support for recovering companies and households.
However, the newspaper cited “colleagues of Mr Sunak” as saying that he wished to begin making some “tough choices” to start to restore the UK’s fiscal health.
Sure enough, it has been suggested by multiple outlets that Mr Sunak has been thinking of imposing an online sales tax on digital marketplaces.
City A.M. also recently reported that the government is considering introducing an “excessive profits tax” on UK businesses that had seen a significant jump in their earnings due to the pandemic. Firms cited as a likely target for this tax include the major supermarkets, as well as Amazon, Asos and food delivery apps such as Deliveroo and Just Eat.
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